Ride it Out, or Bail?

10

Isn't it a bit soon to be thanking Jim? Mr. Market is irrational and can be for very long periods. Rather than crashing an overheated market can also trade sideways until more appropriate valuations arrive.

It's also perhaps worth considering that Jim is much more bearish, or strident about the overvaluation of the market if you like, than, well, the average bear. And, not to forget big bear Buffett who considers stocks "fully priced." Given this it's unlikely that Buffett really thinks stock prices are at nose bleed levels.

Even if you are smart enough, or lucky enough, to sell just before a market crash there's the tricky business of knowing when to get back in and then acting. Easier said than done.

A while back I was talking to a friend at a dinner party who smugly shared that they had sold all their stocks a few months before the housing bubble burst. When did they get back in? They hadn't. They would have been better off sitting tight and riding out the storm.

When you think you see a storm forming on the horizon it's, more often than not, a better idea to batten down the hatches than scuttle the ship and take to the life rafts.